US 3-month/10-yr Treasury curve inverts first time since Oct, Sept Fed rate cut on the cards?
In evidence of escalating concerns about the economic impact from a coronavirus outbreak in China, the US Treasury yield curve inverted on Tuesday for the first time since October 2019.
The yield differential between three-month and 10-year Treasury yields narrowed to -0.015 basis points. The yield curve inversion has mostly suggested a likelihood of US economic recessions in the past.
This has been reflective in the Fed fund futures, as markets now see a Federal Reserve (Fed) rate cut by September versus a rate cut seen in November previously.
In response to increased odds of a Sept Fed rate cut amid the US yield curve inversion has likely dragged the US dollar lower from eight-week highs of 98.03 reached against its main competitors in the last hour.
Its worth noting that the FOMC begins its two-day monetary policy review meeting later on Tuesday, with the decision likely to be announced on Wednesday at 1900 GMT.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
